Many levels converging here in USDJPY
Going into the December BOJ meeting (where they changed YCC), USDJPY was trading 137.50. the 100-day is 136.75 and the 200-day is 137.25. The quintuple top before December BOJ was 137.80/138.20 (red line on chart).
That’s a lot of levels all in one area. And if you were a believer in the idea that there would be repatriation flows from the big boys in Japan… This is probably the zone where those flows would start.
The problem with short USDJPY right now is obviously that yields are going a little bit bazonkers and they are going from benign to mildly scary. And you have Services ISM tomorrow plus we have Tokyo CPI tonight. I have put US 10-year yields on the chart so you can see the correlation.
Note that Tokyo CPI comes out tonight at 6:30 pm NY, March 2. It's more eagerly-awaited than usual because there is an energy subsidy component that could drive the rate substantially lower. The spread of economist forecasts is much wider than usual, running from 2.4% to 4.4% which is nutty dispersion for a YoY figure. Tokyo CPI comes out almost a month before national CPI in Japan and the figure is a ~ perfect lead indicator for the national number. The more critical releases for USDJPY are BOJ 09MAR, NFP 10MAR, and CPI 14MAR.
It’s a curious fact of how USDJPY behaves like a Veblen good… Nobody wants to sell it at the highs or buy it at the lows. There was much more interest to sell USDJPY at 130.00 than there is here and I get it—especially as US recession fears have all but disappeared. Still, to me this is a dream entry point chart-wise and we have fully retraced the entire BOJ move. March 9 BOJ could be in play and my bet would be that USDJPY runs lower into that meeting.
I am bearish here (136.77) with a stop at 138.56. This is also a good time to think about 3-month 125 USDJPY puts.
This is not investment or trading advice. Incorporate the analysis of others, but always trade your own view.
If you want more of this kind of thing, check out my daily (am/FX) at Spectra Markets.
--Brent
That’s a lot of levels all in one area. And if you were a believer in the idea that there would be repatriation flows from the big boys in Japan… This is probably the zone where those flows would start.
The problem with short USDJPY right now is obviously that yields are going a little bit bazonkers and they are going from benign to mildly scary. And you have Services ISM tomorrow plus we have Tokyo CPI tonight. I have put US 10-year yields on the chart so you can see the correlation.
Note that Tokyo CPI comes out tonight at 6:30 pm NY, March 2. It's more eagerly-awaited than usual because there is an energy subsidy component that could drive the rate substantially lower. The spread of economist forecasts is much wider than usual, running from 2.4% to 4.4% which is nutty dispersion for a YoY figure. Tokyo CPI comes out almost a month before national CPI in Japan and the figure is a ~ perfect lead indicator for the national number. The more critical releases for USDJPY are BOJ 09MAR, NFP 10MAR, and CPI 14MAR.
It’s a curious fact of how USDJPY behaves like a Veblen good… Nobody wants to sell it at the highs or buy it at the lows. There was much more interest to sell USDJPY at 130.00 than there is here and I get it—especially as US recession fears have all but disappeared. Still, to me this is a dream entry point chart-wise and we have fully retraced the entire BOJ move. March 9 BOJ could be in play and my bet would be that USDJPY runs lower into that meeting.
I am bearish here (136.77) with a stop at 138.56. This is also a good time to think about 3-month 125 USDJPY puts.
This is not investment or trading advice. Incorporate the analysis of others, but always trade your own view.
If you want more of this kind of thing, check out my daily (am/FX) at Spectra Markets.
--Brent